Why Donor Retention Matters and How Stewardship Plays An Important Role

This post originally appeared on ADRP and was republished with permission.

In my role as a Regional Collaboration Manager for YMCA of the USA, I travel throughout my assigned region helping local YMCAs to maximize the effectiveness of their fundraising efforts. Recently my teammates and I were working with a YMCA to analyze their fundraising metrics and identify opportunities to improve their development work. We were using the Fundraising Fitness Test, a free tool that was introduced by the Growth in Giving Initiative through AFP and the Urban Institute. Using the Fitness Test, we were able to start to see some of the inner workings of their campaign strategies. One portion of the test examines donor retention numbers, and this portion revealed some very interesting things.

The Fitness Test showed us that this local Y was experiencing a huge jump in donor retention rates for NEW donors giving $250-999 (63%) compared to those giving $100-249 (29%). Struck by this, we asked some questions about their new donor receipting and initial gift recognition efforts; everything was basically uniform (and industry standard) for each of the giving levels. Next we asked about their organizational stewardship plan—there wasn’t much to review because they hadn’t yet developed a formal plan. Finally, we asked about handwritten thank you notes and how they were used within their various giving levels. A light bulb went on and the Y suddenly remembered that all donors of $250 or more received a handwritten note of thanks, while donors in lower giving tiers received the general recognition and receipt letter. This led to a fruitful discussion about the effect stewardship has on retention.

We speak of the impact that the handwritten thank you note can have on our donors, but often times we don’t have data to support the argument. While we can’t assume that the jump in this local Y’s retention rates was due solely to handwritten thank you notes, we can make a compelling case that they were a factor. Furthermore, the data gave us an opportunity to start a conversation about the Y’s stewardship practices, which provided more insights into other ways they could improve. We were then able to talk about formalizing a stewardship plan, what to include in that plan, and how we can use segmentation to improve results. Retention results, in particular.

I probably don’t need to explain why we are so hyper-focused on retention or how it relates to stewardship. Industry-wide, donor retention rates have dropped consistently over the past 9 years. We have gone from 50% in 2006 to 43% in 2014 (up from 39% in 2013). Meanwhile, new donor retention rates continue to be abysmal at 23%, while repeat donors are retained at 64%*. The Fundraising Effectiveness Survey Report highlights the importance of these numbers and reveals the overall gains and losses that can be attributed to keeping or losing donors and experiencing upturns or downturns in donor giving.

Our stewardship work can have a direct and dramatic impact on these metrics and may have huge dollar and donor implications down the road (see Dr. Adrian Sargeant’s work on Lifetime Value of a donor for more on this). Beyond the numbers, stewardship is one of the most important tools we have to create a culture of transparency and communication with each donor—connecting their generous to support to the great work being performed by the organization. Retention, or sometimes attrition, can be a litmus test for how well we’re achieving that goal.

The bottom line is this: If we use our data to inform and drive our stewardship strategy (and all decision-making in fundraising strategy) we can greatly improve on the metrics that matter. Similarly, as donor relations professionals who are always looking for ways to demonstrate ROI, we cannot ignore donor retention rates as a measure of our success.

4 replies on “Why Donor Retention Matters and How Stewardship Plays An Important Role”

This is a great piece. If lifetime value is critical. Why is it that organizations measure donor retention as a single year renewal instead of how many years you sustain relationships? It is counter to other sectors that measure retention with longevity. Thoughts?

Great question and smart organizations do measure donor retention over periods of time – first for a year and then for longer periods of time. It has been shown through various studies that the longer organizations retain a donor, the more likely they are to become a major donor, as well as for them to leave the organization in their will or estate plans. Many organizations are just beginning their journey on measuring donor retention, but your point to measure donor retention over the short and long term is an important one to recognize. Thanks for sharing your comment!